Documentation on instancing says:
as a general rule, don’t use GPU instancing for meshes that have fewer than 256 vertices
Could someone please explain the details as to why?
And why do particle systems don’t fit this general rule, as they do have instancing option?
particle systems use dynamic instancing, which is somehow different.
Instancing is more important on small meshes than big ones because the overhead of draw call setup and state switching is high relative to time to execute the actual draw call.
For static (non-moving) geometry, Unity has static batching. It also has dynamic batching, although that’s of questionable value nowadays. Both of those work with small (<256 vert) meshes.